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Head of the Union of IT Enterprises of Armenia: 6000th Anniversary of Our Engineering Traditions

by Administrator, on Mar 29
How the Armenian IT sector is going to compete with such leading players of high-tech industry as Israel and India, and how Armenian IT specialists may surprise the world community.
Armenia 1107872 1920

Author: Yana Israelyan, journalist, based in Tbilisi, Georgia. Write about Information Technologies, Social Media, Citizen Journalistics

The translation was prepared by InnMind.com based on the acrticle at digital.report with the permission. 

The Head of the Union of IT Enterprises of Armenia (UITE) Karen Vardanyan and Executive Chairman Hayk Chobanyan shared their plans with Digital.Report and reported how the Armenian IT sector is going to compete with such leading players of high-tech industry as Israel and India, and how Armenian IT specialists may surprise the world community.

After being declared as a priority in the national economy by the Armenian government in 2000, the sphere of information technologies began to grow year after year. Today IT share is about 4% of the GDP of the country. The annual growth in this sector is 20-25%. Last year the turnover amounted to about $ 400 million and by 2018 the leaders of the IT sector plan to increase it up to $ 1 billion. Today there are more than 450 IT companies in the Republic which employ about 15 000 experts. According to Armenian experts’ estimations, IT-sphere is one of the most highly paid spheres in Armenia. During 2015 salaries in this industry were increased by 11% and programmers vacancies were the leading ones on job hunting web-sites.  

In 2000 six Armenian companies operating in the Information Technology sector created the Union of IT Enterprises (Union of Information Technology Enterprises). Today UITE integrates about 70 organizations covering 70% of the market and is considered to be the largest association in the Armenian IT sector.

DR: What are the main problems of the Armenian IT sector today?

Hayk Chobanyan: The biggest problem is staff members. It is not only in Armenia, it is a worldwide problem. There are about three million IT vacancies in the world. Universities are unable to provide so many experts – HEIs train 500 000 specialists per year around the world. Therefore, education should be changed. The first thing we did is reduction of IT training to 10 years. We launched the program of engineering labs implementation in schools. Students learn the fundamentals of programming, 3D-modeling, electronics and mechanics there. These engineering centers have already been established in 80 schools. This year we plan to equip another 100 schools. Our goal is its own laboratory for each school.  

You said there was strong engineering education in Armenia. What happened to it?

K.V.: Armenian engineering industry failed as a result of collapse in the early 90s - the electricity was turned off, the enterprises were robbed, equipment was exported to Iran as scrap metal. Moreover, Armenia was one of the most technologically advanced republics in the Soviet Union. We developed major military electronics. We had to reconstruct everything from scratch. In 2000 the government introduced a law on IT privatization. Then we had 30 enterprises – now we have 500. Then they employed about 1,500 people, now they employ 15 thousand, i.e. ten times more.

H.C.: IT sector is changing and this change is taking place in a quite noticeable way. This is evidenced by the fact that the sector is growing annually by 20-25%. The government, industry leaders, and community - they all say this is a great result, but we are not happy. Because we know, that the potential is much bigger. We plan to triple the industry’s turnover within four years; it is $ 1.5 billion turnover plus taxes and new jobs not only in the IT sector, but also in other industries. It is believed that the ratio of the professions is the following: for one engineering job there are at least five jobs in other industries. In the US this figure is higher - 1:10; in Europe - 1: 7. We use 1:5. At the first sight this is an ambitious plan, but it is realistic.

What is the state participation in the development of the IT sector? Is Armenian legislation friendly to this sector?

H.C.: Our goals are quite ambitious, but we cannot reach them without help of the state. Since the beginning of 2015 a Law on benefits for start-ups came into force - they are exempted from VAT and income tax and pay 10% of personal income tax instead of 28%. This led to the fact that more than 100 IT companies were created (in 2014 - 40) last year - which proves that mechanisms of encouraging are working.

K.V.: Sure, the latest government is open to IT. It helps us to finance the project of engineering labs in schools (it pays salaries to the executives), it funds our membership dues to the World Alliance of Information Technologies.

Is not there a danger that by assisting the state's role will prevail in decision-making of the private sector?

K.V.: In the IT sector it is not possible because it cannot get closer to enterprises - to manage or at least to manipulate, it is necessary to know what is happening there. There are no attempts, and cannot be - we have the Internet, you can go to work, for example, to Dubai. There are no such problems even in a country like Belarus. There's the other situation there - the authoritarian government is present in all other areas, but it helps to develop the IT sector. Belarusians have a couple of companies that cost about a billion dollars. Our most expensive company is PicsArt ($ 250 million). Per population unit they have 30% more programmers (they have 45 - we have 15) than we have. They have been growing with support of the state for a few years, increasing volumes by 100% annually, and now they have excellent results.

It is necessary to consider several points here. Belarusians, along with Armenia, have been strong in the military electronics since Soviet times. They have saved the industry by having the domestic market plus strong mathematical institutions. And, of course, cultural traditions of the people and just human qualities of Belarusians cannot be discounted - they allowed them to strengthen their positions. Among the leaders of international IT companies in the territory of the former Soviet Union there is a very high percentage of people from the Belarusian IT - thanks to their good working performance. Of course, they also have problems, but it is not about IT. Their Head can “tighten the screws” of a plant director, and as for IT sector – there is nothing to “tighten” - the company can replace to, for example, Warsaw in one day. That's all. Even authoritarian countries will not kill the goose that lays the eggs.

How do Armenian programmers develop the foreign markets? And what markets are considered as the priority ones?

H.C.: Today we began to actively enter Africa - this is a huge market. There are the first contracts with Ethiopia. The other current direction is Iran. It is beginning to be opened. It is possible that many companies want to enter the Iranian market - not only because it is large, but also because of its technological development. It is clear that no one will hurry until they are convinced that there can be a comfortable work conditions. Armenia can serve as a good intermediary platform linking them to Iran. We have, on the one hand, experience of work with Iranian companies, on the other hand - close links with the world companies. About 70% of Armenian IT export goes to the US, 20% - to Europe and just over 10% - to the CIS and Russia. There is a potential to develop our southern regions bordering Iran.

Many countries are complaining about migration of the IT staff. How serious is this problem in Armenia?

H.C.: Emigration of specialists in our sector is small - 4-5%. Of course, usually the best people leave, but there are two sides of the coin. On the one hand - yes, it is a tragedy when the staff leaves, but on the other hand, it is useful. Armenian IT specialists are working in almost all the world's major companies, and it creates new connections and contacts on the basis of which then the subsidiaries are created. Some post-Soviet countries took the model of Estonia for the progress of the IT sector which developed its industry in its time very well. But the years go by – technologies are changing, priorities are appearing, new solutions are being found. So the Estonian model is not the last word in the IT sector. Under the new concept we encourage companies to get engaged into production, rather than outsourcing – it is a high-quality work and it is more cost-effective than outsourcing. We can already feel interest from them. To avoid experts leaving the country there must be interest to stay. We are developing regions for this purpose. It should be an interest for entrepreneurs to start businesses away from the capital, and it is necessary to provide benefits to them. For the last four years more than 20 companies are founded working in regions, some of them have up to 60 professionals.

In 2019 there will be the World Congress of Information Technologies in Armenia. Why was Yerevan selected and what hopes does Armenian IT sector have in relation to the event?

K.V.: This year - in Brazil, in 2017 - in Taiwan, in 2018 - in India, in 2019 – in our country, in 2020 - in Malaysia. Being among the most technological countries is honor for us. Generally, it is interesting that the Congress is often held in the Eastern countries. We can say that the East has become a technology center. Armenia is a little out this series - it seems to be midway between the West and the East. We are very interested in holding the Congress. We expect about 2 500 delegates from around the world. During the week leaders, IT sector gurus, experts from the world's largest companies will gather in Yerevan. This is an important event which will help us to take place on the world market of information technologies.

H.C.: I am sure that 2016 will be the first year of fundamental changes in the Armenian IT sector. But not only we have such ambitions - dozens of countries are trying to break into the first positions. To compete you have to be aggressive. Figuring the program we took into account our current opportunities. Will we have them in five years? We do not know. While we have, we need to have time until 2020 to do something - it's a unique opportunity. 

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